Tuesday, 13 February 2018

Africa’s yawning gap in investment in infrastructure

Lake Turkana windpower station
Africa needs to spend a total of US$ 130-170 billion a year over the next seven years on productive and profitable infrastructure projects, says the Africa Development Bank. The expenditure in order of priority is US$ 35-50 billion on energy, $35-47 billion on transport, and $55-66 billion on water and sanitation.  Of the total capital needed, some $65 billion is already committed by governments and donors. That leaves a yawning gap of $68-108 billion dollars.

 The funds are out there in the world market awaiting into Africa’s productive infrastructure in order to industrialize, create jobs and enable inclusive development and dent the poverty rate.  Institutional investors and Commercial bank and sovereign fund managers are sitting over US$ 100 trillion, a small proportion of this huge savings is need to develop Africa’s infrastructure.

  A Solar Power farm
 All Africa needs is to craft bankable resource Mobilization strategies to fill this yawning gap. The continent, therefore, needs to dust off funds mobilization strategies.These include; Private-Public Partnerships and Foreign Direct Investments and bankable debt instruments.  Such attractive strategies would make Africa a major destination for investments funds.  And the economic prospects in the continent are mouth-watering. The middle class in the continent is growing and driving domestic demand for goods and services.

In fact, says AfDB, the growing middle class is part of the factors that insulate African economies from external shocks. The continent has proven resilient to external shocks, posting robust growth rates amid declining fortunes elsewhere. It is this growing middle class that is driving the growth in tax collection because it is driving demand for local manufacturers making them profitable tax-payers. This has seen tax collection in Africa rise to US$500 billion a year, elbowing out donor funding which stands at US$50 billion, below remittances which stands at $60 billion. Africa is thus a ready market for infrastructure services and a high return market for investment in such services.

 But why, given the huge tax revenue does Africa need investors in infrastructure, why not devote more funds to infrastructure? Simple, there are more competing demands for the limited tax revenue. Therefore, more funds are needed targeting infrastructure development. The resources should be preferably ring-fenced to develop infrastructure.
Entebbe Expressway Uganda: Easing travel time

AfDB prioritizes energy because of its huge economic potential. More than 640 million Africans have no access to energy, giving an electricity access rate for African countries at just over 40 percent— the world’s lowest. Per capita consumption of energy in Sub-Saharan Africa is 180 kWh, against 13,000 kWh per capita in the United States and 6,500 kWh in Europe. Further, access to energy is crucial for reducing the cost of doing business, unlocking economic potential and creating jobs.

Africa’s energy potential, especially renewable energy, is enormous, yet only a fraction is employed. Hydropower provides around a fifth of current capacity, but not even a tenth of its potential is utilized. Similarly, the technical potential of solar, biomass, wind, and geothermal energy is huge.  What is lacking is a pipeline of bankable projects which can attract foreign investors.
 JKIA Nairobi: EaSing international travel

The ball is now in Africa’s court to structure debt instruments to tap into that huge pool. The structuring should be geared towards attracting private investors into the actual development of certain infrastructure projects. Wind and solar are emerging as quick to install sources compared to say, geothermal energy, which takes decades to develop fully.

 But why prioritize investment in physical infrastructure? Unlike other socials investments such as in health and education, infrastructure directly affects productivity and output in the short-run. Increased output in electricity generating capacity will not only raise the stock of energy generating plants, it also part of GDP formation and as an input to the production function of other sectors. Increased availability of electricity will reduce power rationing, thus eliminating the need to invest in standby generators by manufacturing plants. This cuts the productions costs by enabling a more efficient use of conventional productive inputs.

Modern transport systems could increase manufacturing competitiveness cheaply and quickly, moving raw materials to producers and manufactured goods to consumers. Investment in transport infrastructure compliments investment is energy by opening up the market for the goods produced in the continent and cut the cost of doing business. And the resulting growth creates demand for employees thus reducing unemployment and poverty levels.
An SGR line: Easing bulk transport due to high speed

 However, African governments must now start weaning themselves from the provision of all infrastructure.  They must begin to charge the market price for Infrastructure services such as water, electricity, and road tolls. Such payments will ensure that there is enough money to repay the debt, a return to investors and foot maintenance costs thus easing the burden on the government budget. Dependence on tax revenue leads to decaying due to a limitation of funds.

Studies show that other infrastructure sectors are also profitable with IRRs ranging between 16 percent and 25 percent. Thus they are a good candidate for private sector investment providing a source of stable income flows in the longer term.

 Studies also show that  Capital markets in Africa are vibrant and sufficiently sophisticated to mobilize funds for infrastructure projects. Funds managers out there are you listening?

Wednesday, 24 January 2018

Will Total's entry into Kenya Kill Hoima-Tanga Line?

Alternative Route Map: Which will it be?
 The French- Oil Major, Total SPA, has finally been allowed to buy the 25 percent stake held by Maersk Oil exploration international in Lokichar oil fields in Kenya.
 But to get the government’s nod, Total Spa had to “commit itself to the export of Kenyan oil through the Lokichar -Lamu oil Pipeline only.”  That is a major retreat from Total’s position stated last August that it will lobby Kenya to evacuate her oil through the Tanzanian Port of Tanga.
Total SPA, remember, engineered Uganda’s change of mind to evacuate its oil through Tanzania.  The shift, which tossed out of the window an earlier MOU between Kenya and Uganda to evacuate their crude through Lamu Port, soured diplomatic ties between Kenya and Tanzania.
The shift also caused a fall-out between Tullow Oil and Total SPA which ended with Total elbowing Tullow out of Hoima oil fields in Uganda.  Given these circumstances in Kenya, Total was entering into an already toxic market.
It had to tread carefully in Kenya.  Apart from the toxic relationship it had created, Kenya’s Oil Pipeline is an integral part of the Lamu Port- Ethiopia- South Sudan development corridor, LAPSSET. On that score alone Kenya would brook no compromises. Further, it had firm agreements in place. One, the Kenya government had already entered into a Joint venture agreement with the previous set of Oil explorers, which included, Tullow Oil, Africa Oil, and  Maersk to build the oil Pipeline to the proposed Lamu Port.
Two, the JD had already contracted the feasibility study that involves the Front End Engineering Design-FEED. Three, Kenya’s contract with the explorers includes a clause that allows Kenya to acquire a 33 percent stake in the Oilfield once found to be commercially viable. In pursuit of this clause, Kenya is preparing to float the Kenya National Oil Corporation’s stake in Nairobi and London stock Exchanges to raise US$1 billion to buy the stake next year.
That means that Total SPA’s 25 percent stake will be diluted further to about 14 percent, leaving Tullow oil, which owns 50 percent stake and National Oil Corporation as the majority stakeholders. The purchase by Kenya National Oil Corporation makes it difficult for Total Spa to use its financial muscle to bulldoze its will.
Total’s sensitivity on the toxicity of the Kenyan market was demonstrated by the fact that, the CEO, Patrick Pouyanne, whose comments last August was deemed reckless, kept out of the meetings that won Kenya’s nod. Instead, they send Momar Nguer, the President for marketing and services to secure the agreement. Momar Nguer was for a long time the MD of Total oil Kenya.
Where does Total’s “commitment” to Lokichar- Lamu Pipeline leave the proposed Hoima-Tanga Pipeline? Hanging in the balance, analysts say. In Kenya, Total will share the cost of building the US2.1 billion pipeline with its partners in a deal that is already firmed. At the most, she will cough US$500 million. 
In contrast, the company was to foot Lion’s share of the bill, if not all of it- a whopping US$3.5 billion- of the Hoima-Tanga Pipeline.  Will Total SPA choose to cut its losses and turn to the original Hoima-Lokichar- Lamu route? Hoima in Uganda is 500 Km from Lokichar in Turkana county, Kenya.
To export Kenya’s Oil through Tanga would have meant building a 500Km pipeline westwards to Hoima from Lokichar basin, and abandoning the 880Km Lokichar-Lamu section. Following the same Logic, Uganda’s oil could also be exported from Hoima to Lamu and abandon the Hoima- Tanga section. Uganda, it must be noted, is only interested in exporting her oil at the least cost. Could a price-war between Tanzania and Kenya ensue? And can Tanzania win on this score? Tanzanian offered to charge Uganda US$12.20 per barrel transported through her territory. Can Kenya offer a better deal? That remains to be seen.
Despite assurances that the Hoima-Tanga Pipeline will not be affected by Total’s entry into the Kenya Oil sector, that sounds hollow. It looks like payback time for Tanzania.  And Total engineered the second round of trouble for the Pipeline!
The deal itself was a misnomer. Total Oil has no interest in Tanzania at all having found no oil for its Licenses.  The shift to the Tanzanian route so angered Tullow Oil, the firm that discovered oil in Uganda back in 2006, that she sold her stake to Total Spa. But the sale is not a done deal since Total has yet to pay the full US$900 million tag.
Will Tullow buy back its stake in Uganda? Perhaps. Times have changed. Tullow is no longer fighting for survival. Rising Oil prices have made it possible for her to borrow. So far she has secured a US$2.25 billion war chest to fund further exploration.
Two, Tullow will stake a claim on 50 percent of the US$ 1 billion Kenya will pay for a piece of the pie in Lokichar Oilfields. And even if they share equally at 33 percent, Tullow’s war chest will still be enough to power her way back into Uganda. If she does, say analysts, she will force a return to the original plan to evacuate Hoima-Oil through Lokichar in Kenya to Lamu port.
 The prospects for the Hoima-Tanga pipeline no longer look bright. A cloud is building on the horizon, which could condemn it. A school of thought has it that Total can still salvage the Hoima- Tanga Pipeline by completing the Kenya deal, the shop for a buyer of its stake and stick with Hoima Oil Fields where she is a majority stakeholder

An Oil Pipeline under construction
. Whether that works remains to be seen.
 In the meantime, the Kenya-Tanzania diplomatic relations will continue to be frosty.  If there is a second change of heart which favours Kenya, the relations could get worse. 
Tanzania has lost once before to Kenya on a mega-infrastructure project, the SGR project. Despite her spirited efforts to lobby Uganda away from Northern Corridor to Central Corridor, business dictats overruled the political dalliance.  Technical evaluation of the proposal to shift Uganda’s SGR to Central Corridor through the Dar-Salaam Port found it unviable.

 Will another technical evaluation find the Hoima- Tanga Pipeline also unviable? We cross our fingers. Should that happen, it will be President Magufuli’s lowest moment. 

Friday, 19 January 2018

Politicians in east Africa lead in scandalmongering

 Presidents:  Magufuli and Museveni:
 Friendship or deception?
 Politicians in East Africa, lead in scandal Mongering, we can report. 
They willfully distort facts to support fake corruption claims.  This is a malicious bid to sabotage government projects; bully “stubborn Officials” into submission and/or get contracts for their cronies or for themselves, we can report.
A survey of the most berated projects between 2015 and 2017 has established that the corruption claims were fake, driven by malice and selfish political goals.

In all cases surveyed, the allegations of corruption provided no concrete evidence and no one was ever prosecuted.  Instead, technical reviews established cases of malice and vendetta. There was no evidence of sincerity on the part of the critics either. The alleged cases were prosecuted in Press conferences and public rallies.

Four issues emerged in our survey to explain the fake reports: Protection of personal interests threatened by certain developments; tender brokerage, witch hunt, and Propaganda aimed at sabotaging the projects for political gain. In some cases, it was a combination of all four.

To achieve their nefarious goals, the scandal mongers alleged rip-off in the projects.  Among the leading scandal mongers in the region are President John Pombe Magufuli of Tanzania, Raila Amolo Odinga, the veteran oppositionist in Kenya and the Ugandan Parliament.

The three individuals and institutions publicly made claims of corrupt deals which turned out false. Among these is the cost of infrastructure projects such as the standard Gauge Railway from Mombasa to Kampala, highways, water dams and Oil Pipelines. All allegations were designed to sabotage the projects for political and malicious goals.

In 2016, Kenya’s opposition doyen claimed that half- of the US$2 billion raised in a Eurobond borrowing in 2014 was stolen. It was even alleged that the Federal Reserve, the Central bank of the US, helped hide the money. An investigation established that the money was transferred to the Central of Kenya’s account at the Fed.

Even the Controller and Auditor General undertook a mission to the Fed and is yet to publish his findings more than a year later. Investigations established Zero evidence of theft and the file closed. It was noted that the Eurobond, floated in the Irish stock exchange on June 14, 2014, hit the market on the same day that the Somalia based terror group, Al-shabaab, slaughtered over 100 people in Mpeketoni, in Lamu County, Kenya.

Analysts then suspected that the terror attack was designed to sabotage the Eurobond, by projecting Kenya as insecure. The market oversubscribed the bond by 400 percent.

In Uganda, a parliamentary Committee almost grounded the Standard Gauge Railway project by alleging massive rip off. The Parliamentary Committee on Infrastructure, headed by Dennis Sabiti, wrote a malicious report about Uganda’s SGR.  The committee alleged that the $2.3 billion tab for the  273 Km Malaba-Kampala section was a rip-off citing Ethiopia which had completed a 760Km line of just about the same amount.

The Tanzanian president, relying on this report, tried to talk the Ugandan President into re-routing the line from Mombasa to Dar-Es-Salaam through the Central Corridor. Magufuli willfully misled the Ugandan President, alleging that the Northern Corridor SGR was a rip-off as the Tanzanian line was cheaper.
This was in a bid to shore up his own line which is deemed unviable. The region to be served cannot generate sufficient freight tonnage to make the line viable. All countries, to be served, Including Tanzania, Burundi and Rwanda can generate only 8.5 million tones in line whose capacity is 17 million tones a year. Uganda’s freight, on the other hand, is 10 million tones a year, a mouthwatering prospect for the DIKKM.
Raila Odinga: Leading scandal
Monger in kenya

Picking the cue from the President, the contractors building the Tanzanian line- Turkey's Yapi Merkezi Insaat VE Sanayi As and Portugal's Mota-Engil Engenharia- also tried to get Museveni to give them the deal.

 However, evidence emerged of vendetta on the part of Mr. Sabiti.  The Politicians had an ax to grind with the Works Permanent Secretary. The PS has refused to fund the Parliamentary Committee’s two- week benchmarking trip to Ethiopia, Kenya, and China, irking the Politicians who paid him back by bad mouthing the project.  

Further, it emerged, the Northern Corridor Railway is superior to Tanzanian and Ethiopian lines. It also emerged that, no matter who constructs the line, the cost cannot be lower given the Ugandan terrain.  The Tanzanian and Ethiopian lines were cheaper because apart from being inferior, they also were upgrades of an old line, were constructed on a relatively flat terrain and had fewer or no bridges. 

 Bridges form 30 percent of the cost of constructing a Railway line and Uganda will have 27 Km of bridges. Those findings discredited the Parliamentary report and President Museveni stuck to the Kenyan link.

The same malicious tongue lashing was evident in the 51 Kilometre Kampala-Entebbe expressway. The road was branded the most expensive highway in the world by Uganda’s Parliamentary committee on statutory Enterprises, COSASE. The Committee wondered how a kilometer of Road cost $9.3 million and ordered the review of the same. 
The expressway is a four-lane expressway that boasts 19 fly-overs and bridges measuring 2.77 Kilometres. It also boasts of the 1.4-kilometer Nambigirwa Bridge, the longest four-lane bridge in Uganda and East Africa. The US$497 million expressway, is thus 206 kilometres of road on a 51 kilometre stretch. Consequently, its cost is US$2.4 million per kilometer which is the standard price for such roads elsewhere.

In Kenya, the Standard Gauge Railway line from Mombasa to Nairobi faced severe criticism regarding its cost. Some politicians even suggested that US$1 billion was stolen from the project thus inflating its cost.  It emerged later that the politicians, all members of opposition party, ODM, were funded by a tenderpreneur who lost the bid to get his chosen contractors build the line on a PPP basis.
Anne Waiguru: Lost her job to scandalmongering
The same tenderprenuer was also behind the Eurobond saga, paying the same politicians to dispense fake reports. He was also behind the NYS scandal which alleged massive theft of public funds. However, the parliamentary Public Account Committee could not even put a finger of the amount stolen and the culprits, calling instead of the investigative agencies to investigate an Officer.
Emerging evidence suggests that the committee, headed by Opposition MPs, was working to cover-up the lies spread by their leader. The Party itself leads a corruption tag team in Kenya.

The SGR line is already complete and operational. It has lived to its expectations of cutting travel time between Nairobi and Mombasa to four hours for passenger train and 8 hours for the freight train.
However, freight truck owners, some of them, politicians, are crying for their business is at stake: One fully loaded train puts 300 trucks off-the-road while a fully loaded 20-car passenger train puts 56 buses off the road.
The lesson from our research is: the media was taken for a ride as it parroted the allegations without interrogating them. They never questioned the experts, that is, the people implementing the project and asking to see the design documents and the contract agreements.

Short of this, the media helps politicians and corrupt businessmen to sabotage projects that would otherwise benefit our countries. We help condemn our countries- and ourselves - into a state of perpetual under development in the name of fighting corruption. 

Wednesday, 3 January 2018

Why Tanzania should abandon Regional SGR

The region marked in red is waste of
Good Money
Tanzania should abandon its regional SGR ambitions for now. She should instead focus on and develop a domestic SGR.  The regional SGR is spending good money chasing after bad money.

This is why; Uganda has chosen to build her Standard Gauge Railway link through the Northern corridor to the Mombasa Port. Uganda’s departure puts the viability of the Central Corridor and the Dar-es-salaam Port as a regional transport hub, in doubt.

The feasibility study on the Dar-Es-salaam, Isaka, Kigali, Keza- Musongati ( DIKKM) Railway Project, as the Central Corridor line is called, shows that the traffic flow on the line is low and that, to make a minimum return on investment, it must ship 8.5 million tons per year.

Tanzania on her own can generate an estimated 3.1 million tons of freight per year; Rwanda, including DRC 2.3 million tons and Burundi 3.1 million tons. These numbers are estimated at what is called the conservative low growth.
Kenya has already hit the ground
 running, attracting Uganda

Higher freight traffic, says the feasibility study, is possible if the Railway line diverts part of the traffic that is shipped through the Northern Corridor.  This is why, say analysts, the Tanzanian government, attempted to woo Uganda away from the Northern corridor in favour of the Central corridor.  Uganda ships an estimated 10 million tons of cargo a year.
Now that Uganda has changed her mind, Tanzania has to re-think its investment on SGR urgently. If Rwanda, favors the Northern corridor, Tanzania will be alone in the project given the economic and Political turmoil in Burundi.
Tanzania, given the current uncertainties, is free to change its mind about where to invest the US$7.6 billion slated for investment in the Central corridor. She should abandon the extension of the line beyond Isaka to Keza and Musongati. The 413 km of Greenfield Railway will be a wasted investment. At the current rate of US$5 million per kilometer, Tanzania will waste US$ 2.075 billion dollars.
Instead, this money should be spent on the proposed Dar-es-salaam Mtwara line.  Mtwara, which is rich in Coal and Iron ore deposits, is roughly 556 Km from Dar-Es-salaam. At the current rates, this line will cost US$2.78 billion to open Mtwara‘s mines for exploitation and transport the coal inland to cement manufacturers and other users upcountry.
The DIKKM feasibility study ignored the domestic freight focusing only at exports and imports.  But the coal mines and cement manufacturers in the Mtwara region could supply enough tonnage to sustain the Railway line.
Despite spirits effort by Magufuli(R) Museveni (L)
 chose the Kenya loop
Further, a railway line has direct economic links with the local economies of the areas it traverses, opening them to exploitation, thus spurring unforeseen economic activity.
The Central Corridor will traverse several high potential towns to wit: Morogoro, Kilosa, Dodoma, Manyoni, Tabora, Isaka and Shinyanga. Extending the line to Mtwara will raise the number of major towns served by the line to eight from the current seven.
These towns are expected to grow rapidly as economic zones in the short run due to ease of transport.  A number of new sectors will sprout in addition to agriculture and mining. These include; tourism and related services, distribution, building and construction. This growth will spur economic activity within the cities and their hinterlands that would feed on the railway line.
Demand for transport services will also escalate and, given the state of roads in Tanzania, the bulk of this demand will be met by the railway line which is safer and faster compared to road transport. The result is: Tanzania will end up generating more internal passenger and freight traffic than anticipated. Such potential should be meticulously natured.
The greatest bottleneck in Tanzania especially, for agricultural produce and other sectors, is transport and power supply. This means that both enabling infrastructure categories must be developed simultaneously in order to spur growth.
One other potential that was down-played in the feasibility study is passenger traffic. Experience in Kenya shows that passenger traffic can generate significant revenue. The Nairobi- Mombasa section has generated great interest in passenger travel because of speed and cost and is running four trains per day only five months after launch.
In Tanzania, given its vast territory, the demand for passenger trains is higher than in Kenya. The high-speed trains could soon become a major incentive for passenger travel and generate significant revenues.
The drudgery of travel is the greatest disincentive for travel. High-speed travel in a reliable and safe mode will spur domestic tourism in Tanzania.

 The Central Corridor is the longest rail route in one country in East Africa. It also has the largest potential to spur well-distributed economic activity in the country which, in turn, will generate higher demand for its services. 

Thursday, 14 December 2017

Total SA’s foray into east Africa hits rough winds

First flare up test at Hoima

The French oil Major, Total S.A’s foray into East Africa’s oil exploration sector has run into headwinds. The foray itself brought tumult in the sector and the region. Farmed into Hoima Oil fields by Tullow Oil, Total SA soon began maneuvers to elbow out its hosts and take full control of the 1.7 billion barrel fields.
 Tullow oil was the first oil explorer to find oil in Uganda in 2006. It farmed the oil Majors Total SA and the China National Offshore Oil Corporation (CNOOC) for 33 percent stake in Hoima Oil fields in Uganda.  Meanwhile, Tullow Oil together with its Canadian partner Africa Oil had discovered oil in Kenya’s Lokichar Basin.
So Tullow planned to export its crude through the proposed Lamu Port in Kenya. For this both governments in Uganda and Kenya agreed to set up a special purposes vehicle to build an oil Pipeline through Kenya.
 But then Total, secretly contracted a US company, Gulf Interstate, to do a feasibility on the Uganda-Kenya route which they found unfeasible, recommending the Pipeline be built through Tanzania’s to the Port of Tanga.  Uganda bought the idea and re-routed her planned oil pipeline.
This angered Tullow who off-loaded 22% of its 33.3 per cent stake to Total SA in a US$900 million deal. Tullow moved to Kenya.
 It also poisoned diplomatic relations between Kenya and Tanzania that are still chill. Now Total S.A appears set for her own tumult.
First, it appears that Total, buoyed by her success in elbowing Tullow out of Hoima Fields also began to bully CNOOC out of the fields too. CNOOC is not about to be bullied to sell her stake for she represents wider Chinese interests than just oil.
 She also represents the interests of Chinese construction companies who were eyeing the deal to construct the Pipeline. So she resisted all manoeuvres by Total SA to control the business.
 Either by coincidence or at China’s behest, some skeletons began coming out of Total SA’s cupboard. It emerged that despite the seemingly cordial relations with Tanzania, there were undercurrents. President Magufuli of Tanzania developed misgivings about Total, which had disagreed with his technocrats on parts of the deal. He advised his friend President Museveni to go slow on Total.
 It also emerged that, Gulf Interstate, the firm that carried the feasibility that badmouthed the Kenya route, may not have been competent in that line after all. Museveni had based his decision to re-route the oil Pipeline south on this feasibility study.
The re-route that Cost Kenya the Pipeline
 Further, Equatorial Guinea has cautioned President Museveni to be weary of Total.  The firm had defrauded Equatorial Guinea of Euros 73 million worth of crude exports between 2010 and 2012. And E.Guinea is demanding a refund. 
Tullow, according to Uganda’s the independent Magazine, sold its stake due to frustration by the Uganda government over the Crude oil pipeline route. Tullow favored the Lamu Port, because of her interests in Kenya’s Lokichar Oilfields. The pipeline from Hoima to Lamu through Lokichar would have enabled Tullow to export the Kenyan oil on the same Pipeline.
 Now, the disagreement is said to be so intense that the partnership could collapse if not resolved, further delaying Uganda’s entry into the oil exporters club. This is why the Uganda government has been roped into the dispute. Both Total SA and CNOOC are lobbying Uganda President to get an advantage over the other but the Chinese are said to be gaining the upper hand.
In November, both sides visited the Uganda President but the Total delegation, sources say, left “unhappy”. The Chinese, led by the Ambassador in Uganda, and the CNOOC vice-President, had met the President earlier and are said to have raised concerns about Total.
To the east in Kenya, where Total SA acquired 25 percent through a buy-out of Maersk Oil from the firm’s parent company, A.P. Moller-Maersk, things do not look rosy either.  
The National Oil Corporation, the industry regulator in Kenya, plans to float shares in both NSE and LSE in 2019 in an IPO to raise US$1 billion for 33 percent stake buy-in in Lokichar Oilfields ahead of Production.
Lokichar, boasts of 750 million barrels but new wells are being discovered. The basin which extends to Ethiopia is thought to hold 23 billion barrels of the black gold.
The government’s entry into the oil sector will whittle down the stakes of the other partners. The partners in Lokichar are Tullow 50%, Africa Oil 25% and Total SA 25%. The presence of the government will whittle down Total SA’s potential influence, reducing it to a spectator. The firm had expressed its desire to lobby Kenya to allow Kenya’s crude to be exported south through the Tanga Port in Tanzania.
Such a move would have killed the US$2.1 billion Lokichar- Lamu Oil Pipeline. It would also have killed the proposed 120,000 barrels a day oil refinery in Lamu. With the entry of the Kenya government into the industry, such a dream is effectively killed.
Assuming each partner cedes 11 percent stake, then Kenyans will be the second largest stakeholder after Tullow which will control 39 percent, Kenyans 33 percent, Africa Oil 14% and Total 14 %.
Since oil price is recovering in the international market, frontier sources such as East Africa will become the ground for intense battles among the oil Majors. Total SA’s stated goal is to be the first on the ground.
However, others-including the Chinese -are also seeking to increase their stock of crude oil, and this means bare-knuckled battles. According to Uganda’s The Independent Magazine, the Chinese appear set to stay put. And the government, it says, appears lukewarm towards Total S.A.
This places the oil major between a rock and a hard place. Should it continue with its bullying ways, governments could step in to scuttle its schemes.  Uganda, sources indicate, has not entirely abandoned its plans to ship oil through Kenya nor did Tullow dump all its stake on Total’s hands.
Uganda is the cradle of Total SA’s presence in East Africa. Should it slip through its hands, even the Pipeline through Tanzania will be in jeopardy. 

It remains to be seen how Total S.A wades through the waters it muddied.

Sunday, 3 December 2017

Kenya Gearing for robust growth in 2018

Kenya is revving for faster growth in the coming year, all things remaining the same, we can report. The country, whose growth is among the fastest in the continent, is expected to register slow growth in 2017 compared to 2016.  Last year, national wealth grew by a robust 5.8 per cent but is expected to slow down to 5.0 per cent or below.
However, all fundamentals for a fast turnaround are in place: the short- rains have been adequate and well distributed, inflation has turned south and will continue to do so as food supply increases, oil prices still look low and the political climate is cooling off albeit with pockets of noise.
The short run headwinds namely; the uncertainties arising from a prolonged electioneering is well behind us, the economic tremor caused by the invalidation of the presidential vote on September 1st is also behind us. The tide is turning in favour of economic prosperity.
 Prolonged drought since the second half of 2016 coupled with poor long rains were the draw back to wealth creation this year, says the Second-Quarter GDP report published by the national Bureau of statistics
There were shortages of all agricultural products including Maize, Sugar cane, coffee and milk leading to low activity in the agro-processing sector. Shortages means that someone is not producing and therefore making money and employing others.
Completion of some mega infrastructure projects also slowed down activity in some sectors. Both slow-downs led to lay-offs which increased unemployment in the country. However, the resurgence of activity in mega- infrastructure projects including the Thwake Dam, the Lamu- Isiolo highway and the second runway at the JKIA are expected to boost cement consumption and activity in the construction sector.  
These shortage resulted in inflationary pressures that saw overall inflation rise to 8.04 in August before declining to 4.73 in November 2017.
The shilling, which was suffering the ravages of political uncertainty has appreciated to 102.95/103.10 on December 1st from Shs103.75/103.90 in November 14th when the Supreme Court upheld President Kenyatta’s re-election.  It is expected to appreciate further as political risk retreats and investors troop back to the local financial market.
The decline political risk, coupled with increased output in the agricultural sector and the 50 % reduction in electricity tariffs for the manufacturing sector, during the night, has set the stage for robust growth next year as investors dust their shelved investment plans.
There is one potential drawback though, Oil prices are turning north sending a clear signal of a raid into our pockets in the new-year. A barrel of crude has hit $64 per barrel which translates into higher pump prices.
 However, the good rains are expected to dampen the pressure as the Hydro-dams levels rise, increasing the amount of cheap-green- energy in the market. The

Experts see a 5.9-6.0 growth rate next year. They see a higher rate in 2019 other being the same.

Thursday, 23 November 2017

Back to abnormal. Raila is done!

Supreme Court: Sealed RAO's career

The Supreme Court of Kenya on Monday this week sealed Raila Odinga’s political fate. By upholding Uhuru Kenyatta’s re-election on October 26th, it  paved the way for Kenya to go back to abnormal because Raila is done!

Go back to abnormal? To many Kenyans normal is going back to their normal routine. That’s true. But one “normal” will be missing- regular disruptions by Raila Odinga and his surrogates. Odingaism is Kaput!
 The old man, a very good mobilizer but a poor strategist brought this on himself.  He chose the wrong path to State House and has never learnt from his previous failures, probably because he believes his own lies. He created an impression of a national outlook in his party by surrounding himself with communities that do not have the numbers to take him to state house, unless he is running alone! That was a sure way to keep him in the opposition benches.
 Politics is about numbers and persuasion. He is very poor in both. He was a poor student at school both in Kenya and East Germany, where he took to so long to understand basic concepts. That poor scholarly aptitude is echoed in the political school where he has failed to grasp a basic truth about numbers and politics.
He failed completely to penetrate the vote-rich central Rift valley and Mount Kenya region due to his brinkmanship- he believes in bullying, intimidation, disruption and violence which put-off many Kenyans, including his late father, Jaramogi Odinga Oginga. This was noted as a major weakness by his Marxism instructors in East Germany who found him disorganized, disruptive and lawless-never kept time for instance, says an EU council intelligence. Even to date he has few friends in Kenya.
 He is unruly and does not belief in due process. This character almost brought the Supreme Court of Kenya, which invalidated Uhuru’s win in August 8th, into disrepute.  Instead of obeying the Court’s orders, by going to campaign, he resorted to disruptive tactics- making demands for personnel changes at the IEBC and a plethora of other demands unrelated to the elections.  
When his will hit a stone all, he pretended to withdraw from the election and when that failed, he called for the boycott of the elections. Despite this call and the violent blockade of voters in his Luo Nyanza, the election still went ahead and he lost by seven million votes.
Jimmi wanjigi: Investment gone to waste?
This author predicted after the nullification of Uhuru’s win in September that Raila was handed a rope to hang himself by the Supreme Court. The same court drove the final nail in his political career’s coffin On Monday. “Now he can kick as much as he pleases,” to quote Shaka the Zulu king of the 17th Century.
And now his options are limited. One way that seems open to him, is open defiance and probably getting sworn in as President. This is high treason which carries a mandatory death sentence.  There is also the international Criminal Court, which is monitoring his activities and would surely relish a date with him. Will he take that route? Only time will tell.
The entry of ICC into the picture is a pointer to his declining popularity in the West. His recent trips to the US and Britain were flops. He has painted himself into a corner.
But for the time being, he and his surrogates have no option but to rant and yell-shouting intimidating slogans whose viability is next to Zero. Only one result is possible- failure.
 The journey to Canaan is over. It’s back to the wilderness for him and his surrogates, a failure that will spawn a string of destitute people, who hanged on his coat labels.
Topping the casualty list is businessman, Jimmi Wanjigi, who invested billions of shillings funding Raila and NASA in an attempt to bring Uhuru down. Instead, he could end up going down the drain as the billions he blew up supporting Raila could turn out to be a complete waste.
 He supported NASA on the understanding that if the party wins, he shall get almost all mega infrastructure and security contracts amounting to Kshs 2.27 trillion. From these he hoped to make Ksh 400 billion in profits. This made investing tens of billions a worthy investment. Chances are he is facing another five years of financial drought which spells doom for the tenderprenuer.
The self- proclaimed “Father of political patronage” like all other party supporters are living in denial. They still brag that they shall install Raila as president. That remains to be seen. However, one thing is certain, Uhuru will ensure that Wanjigi is cut to size. He has already crippled his two major projects, the SGR and the second terminal at JKIA. There is no reason to belief any other projects will not be crippled in future- if he ever gets them that is.
With Wanjigi trimmed, the protest industry emerges as the next potential destitute. Without Wanjigi bankrolling it, It is dead. Some NGOs may try to fit in his ugly shoes, but they are also equally vulnerable. The end for street protest over every little matter is nigh, hence our abnormal future.
Raila: Made a disastrous blunder
Another destitute lot are the country parliaments that have rushed to pass the “People assembly” law. They could be disbanded and their counties placed under the national government clipping Raila’s wings further. Without MCAs to mobilize goons, he is a sitting duck.
 There is talk of sabotage, that is, all NASA MPs and Senators will resign en-mass citing dissatisfaction with the president. This is a probable move, but a disastrous one, just like the People’s assembly. It remains to be seen how many MPs would risk their salaries now to go to a new election. There is serious doubt whether more than 100 MPs would resign. And even if they did, 100 out of a 290 member house is a minority that can be filled through by-elections.
This is one idea that is appealing but impracticable. Just like the boycott idea, this will add to a string of failures in the past. These include: Okoa Kenya; the journey to Canaan; boycotting certain companies and products; labour unrest in critical sectors of the public service such as Doctors, Nurses, teachers, lecturers; boycott of elections and finally NRM. Raila was out foxed at every turn and now he appears headed for the oblivion.
He has two choices in his journey to oblivion: Either exit the stage quietly and peacefully or take the path to self-destruction- violence and defiance. Either way, the destination is oblivion! What is not clear is how soon the journey will end.